In recent weeks, the media has been flooded with warnings of an impending stock market bubble. Amidst this frenzy, a recent article in SvD featured interviews with two financial analysts discussing the stock market and AI. One analyst was skeptical while the other remained optimistic. The initial headline, “Advice to Swedes: Review Your Fund Holdings,” only highlighted the pessimistic perspective. After some back-and-forth with SvD, both the headline and the introduction were revised. However, this type of biased reporting is all too common.
Statements like “The stock market is bubbly,” “It’s about to turn downward,” or “I would sell everything” have been echoing through various media outlets. Even SVT’s Ekonomibyrån featured two solemn figures in suits proclaiming in a program titled “The Peak of the Stock Market is Reached.” At Small Investor’s Guide, we have noticed a surge in inquiries from individuals who are fearful and, in some cases, have already divested their funds.
These sensationalized articles may attract clicks, but they lack credibility among informed readers. For instance, Ekonomibyrån made a fuss about the stock market being at an “all-time high,” failing to acknowledge that this is a common occurrence given the market’s historical trend of rising more often than falling. In fact, on average, the stock market reaches an all-time high every three weeks. The real question is whether media pundits truly know better than the market itself.
Peter Malmqvist, an independent analyst and one of the pundits on Ekonomibyrån, has been predicting a stock market crash since 2019 on at least ten occasions. Those who heeded his warnings would have missed out on the over 100% returns that global funds have generated since then.
What about Warren Buffet, the renowned investor? Despite his reputation for beating the market since the 1970s, his company Berkshire Hathaway has performed on par with a stock-picking monkey over the past 20 years. The annual average return on Berkshire Hathaway stock between 2003 and 2022 was 9.75%, while the S&P 500 index returned 9.80%. The difference is negligible, challenging Buffet’s legendary status.
Having worked in finance for 18 years, I’ve learned that timing the market is exceedingly difficult. Media warnings do not necessarily correlate with actual market movements. While a major crash may loom in the coming years, this uncertainty is ever-present. It’s equally plausible that the market could surge another 100% in the next five years.
What remains certain is that over the past century, the stock market has consistently outperformed downturns, rebounding from events like the Great Depression and World Wars. It has proven to be the optimal choice for long-term investments.
When media sensationalizes market risks, it can instill fear in small investors, leading them to make hasty decisions like selling off their funds. However, timing the market re-entry is just as challenging as deciding when to sell. Those who sell now may jeopardize their financial future and lose sleep over re-entering the market.
Therefore, do not let media bubble warnings prompt rash decisions. Continue to invest long-term funds in a global index fund and only check your account when the market is up to avoid distress over red figures.
Patrick Siegbahn is the founder and editor-in-chief of Small Investor’s Guide. This opinion piece reflects the author’s analysis and stance.